Student Debt Is Surging at For-Profit Colleges
Ever since the end of the Great Recession, college enrollment-and the student loan borrowing that goes with it-has been dropping every year. (See Figure 1.) The steepest declines in new student debt over the past decade were at the schools where enrollment was also declining: for-profit colleges. These schools, which had grown rapidly before and during the recession-frequently, by using manipulative recruiting tactics and providing a substandard education, since the bulk of their funds are typically dedicated to marketing-shrank as the economy recovered over the past decade.
But the decline in new student debt in the for-profit college sector has now reversed, according to TCF’s analysis of federal student loan data through –20 academic year. A 7 percent increase in federal student loan disbursements-that is, in the dollar value of new loans issued to students-at for-profit colleges is the first year-over-year increase since 2010. At nonprofit and public schools, in contrast, borrowing continued a trend of modest declines, dropping 2 percent and 3 percent, respectively.
New Student Debt at Covert For-Profits Spikes Upward
The largest increase in new student debt was at Grand Canyon University, where loan disbursements increased by $119 million through e period the previous year, a jump that is more than double that of any other college in the country. Grand Canyon is a covert for-profit; that is, it has been marketing itself as a nonprofit university, but the U.S. Department of Education last year found the school to be a “captive client” of a for-profit company that is also run by the school’s president. The CEO had boasted to shareholders that “Being out there a million times a day saying ‘we’re nonprofit’ has had an impact.”
Grand Canyon, which reported enrolling 90,253 students in the fall of 2018, spends less than 20 cents of every tuition dollar on instruction. The school has a physical campus in Phoenix, but the bulk of its students, pre-pandemic, were enrolled exclusively online (94 percent of its 36,114 graduate students and 67 percent of its 54,139 undergraduates). Because one student may receive multiple loans (including a loan to a parent), the available data on total dollar volume and number of loans do not allow for analysis of the number of unique borrowers and the amounts borrowed. Grand Canyon students borrowed 25 percent more dollars, but took out only 11 percent more loans, suggesting the increase in total debt stems from two factors: more students are borrowing, and students are borrowing more.
Other schools with sketchy claims to nonprofit status also grew new student debt. Stevens Henager College and its online Independence University disbursed 15 percent more student loan dollars so far this academic year compared to last year. Borrowing at Keiser University rose 12 percent, while loan volume at Ultimate Medical Academy grew a more modest 6 percent.
Growth in Online Schools and Programs
Of the large, well-known schools enrolling students in exclusively online programs, Florida-based Full Sail University, owned by a private equity https://paydayloanstennessee.com/cities/knoxville/ company, had the highest loan growth rate, a 34 percent increase in loan dollars and 32 percent more loans-suggesting a big upward spike in enrollment. The for-profit University of Phoenix and Strayer University both grew their loans at a 12 percent clip, nonprofit Liberty University showed a 10 percent increase in loan volume, public Arizona State University increased student borrowing by 8 percent, and for-profit Walden University’s loan volume increased by 2 percent. The nonprofit Southern New Hampshire University, which has grown rapidly in recent years, had a 5 percent decrease in loan volume, while total student loan funds at the nonprofit Western Governors University, for-profit Capella University, and public-for-profit Purdue Global were essentially unchanged.